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What is spousal fiduciary duty and how does it impact a divorce?

On behalf of Bartholomew & Wasznicky LLP posted in Divorce on Monday, December 11, 2017.

In California, marriage is more than just a legal union of two people. Marriage creates an equal partnership that, according to California public policy, obliges spouses to owe each other the same good faith and fair dealings they would give someone else in another fiduciary relationship. In laymen's terms, you have a spousal fiduciary duty to better the community property (marital property) as does your spouse to you.

So what does this mean in the context of marriage? Additionally, if a married couple separates, can a perceived breach of spousal fiduciary duty affect the divorce settlement?

Understanding spousal fiduciary duty

To better understand what spousal fiduciary duty -- which you can read a more indepth summary on our FAQ page -- we must first look to the California Family Code, specifically Family Code §721 (b) which, in short, requires spouses to make "good faith" dealings that do not give one spouse a financial advantage over the other.

Examples of not adhering to your spousal fiduciary duty may include failing to disclose lottery or gambling winnings or placing winnings in a separate account only you can access, making an investment using separate property even though community property is available, or allowing community stock to suffer when separate stock from the same company was sold earlier for a profit.

What are a spouse's duties?

There are three major duties California law requires of couples considered to be in a fiduciary relationship:

At all times, spouses must provide access to any books or records of transactions for the purpose of inspection or copying;

Upon request, spouses are required to provide full, accurate and true information about any and all transactions involving or relating to community property;

If any transaction made without the other spouse's consent results in profits or benefits, the holding spouse must disclose the outcome to the other spouse.

What legal remedy is there for breach of spousal fiduciary duty?

Breach of duty concerns involving spousal fiduciary duty typically arise in high-asset divorces and in marriages where only one spouse is in control of a personal or family business holding, and he or she is the sole person making financial decisions regarding the company. However, it's worth noting that all couples have a financial responsibility to maintain the integrity of community property, which means spousal fiduciary duty issues may arise for couples in any economic bracket.

What's important to know is that civil action can be taken against a spouse who has abused their fiduciary duty. Typically, divorce is the most common remedy sought. However, it's possible for a breach of spousal fiduciary duty to lead to remedies being awarded in the divorce settlement.

As you probably realize, these types of family law cases can be incredibly complex, which is why most retain the services of a family law attorney with particular experience handling complex financial issues in divorce proceedings. Anyone in a same or similar situation is wise to do the same.

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